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Pay for Percentile

  • Gadi Barlevy
  • Derek Neal

We propose an incentive scheme for educators that links compensation to the ranks of their students within comparison sets. Under certain conditions, this scheme induces teachers to allocate socially optimal levels of effort. Moreover, because this scheme employs only ordinal information, it allows education authorities to employ completely new assessments at each testing date without ever having to equate various assessments. This removes incentives for teachers to teach to a particular assessment form and eliminates opportunities to influence reward pay by corrupting assessment scales. Education authorities can employ separate no-stakes assessment systems to track trends in scaled measures of student achievement. (JEL I21, I28, J33, J45)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.102.5.1805
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 5 (August)
Pages: 1805-31

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:5:p:1805-31
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  1. Ladd, Helen F., 1999. "The Dallas school accountability and incentive program: an evaluation of its impacts on student outcomes," Economics of Education Review, Elsevier, vol. 18(1), pages 1-16, February.
  2. Green, Jerry & Stokey, Nancy, 1983. "A Comparison of Tournaments and Contracts," Scholarly Articles 3203644, Harvard University Department of Economics.
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  4. John Cawley & James Heckman & Edward Vytlacil, 1999. "On Policies To Reward The Value Added By Educators," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 720-727, November.
  5. Paul Glewwe & Nauman Ilias & Michael Kremer, 2003. "Teacher Incentives," NBER Working Papers 9671, National Bureau of Economic Research, Inc.
  6. Jacob, Brian A., 2005. "Accountability, incentives and behavior: the impact of high-stakes testing in the Chicago Public Schools," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 761-796, June.
  7. Carmichael, H Lorne, 1983. "The Agent-Agents Problem: Payment by Relative Output," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 50-65, January.
  8. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-64, October.
  9. Derek Neal, 2010. "Aiming for Efficiency Rather Than Proficiency," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 119-32, Summer.
  10. Adele Atkinson & Simon Burgess & Bronwyn Croxson & Paul Gregg, 2004. "Evaluating the Impact of Performance-related Pay for Teachers in England," The Centre for Market and Public Organisation 04/113, Department of Economics, University of Bristol, UK.
  11. Victor Lavy, 2002. "Evaluating the Effect of Teachers' Group Performance Incentives on Pupil Achievement," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1286-1317, December.
  12. Scott E. Carrell & James E. West, 2008. "Does Professor Quality Matter? Evidence from Random Assignment of Students to Professors," NBER Working Papers 14081, National Bureau of Economic Research, Inc.
  13. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 486-507, June.
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  15. Bhattacharya, Sudipto & Guasch, J Luis, 1988. "Heterogeneity, Tournaments, and Hierarchies," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 867-81, August.
  16. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
  17. Christine Harbring & Gabriele K. Lünser, 2008. "On the Competition of Asymmetric Agents," German Economic Review, Verein für Socialpolitik, vol. 9, pages 373-395, 08.
  18. Edward P. Lazear, 2001. "Educational Production," The Quarterly Journal of Economics, Oxford University Press, vol. 116(3), pages 777-803.
  19. O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
  20. Dale Ballou, 2009. "Test Scaling and Value-Added Measurement," Education Finance and Policy, MIT Press, vol. 4(4), pages 351-383, October.
  21. H. Vogt, 1983. "Unimodality of differences," Metrika- International Journal for Theoretical and Applied Statistics, Springer, vol. 30(1), pages 165-170, December.
  22. Flavio Cunha & James J. Heckman, 2008. "Formulating, Identifying and Estimating the Technology of Cognitive and Noncognitive Skill Formation," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
  23. Daniel M. Koretz, 2002. "Limitations in the Use of Achievement Tests as Measures of Educators' Productivity," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 752-777.
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